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Quantified Strategy
Decreased uncertainty, improved decisions
Global Advisors is a leader in defining quantified strategies, decreasing uncertainty, improving decisions and achieving measureable results.
We specialise in providing highly-analytical data-driven recommendations in the face of significant uncertainty.
We utilise advanced predictive analytics to build robust strategies and enable our clients to make calculated decisions.
We support implementation of adaptive capability and capacity.
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Thoughts
Global Advisors’ Thoughts: Are you a good communicator? Really?
By Marc Wilson Marc is a partner at Global Advisors and based in Johannesburg, South Africa This article is part of a series of Global Advisors thoughts: http://goo.gl/4vD6aM Download this article: Please fill in your details below and you will instantly be sent a...
Strategy Tools
Strategy tools: Effective transfer pricing
So much has been written about transfer pricing. Yet it remains a bone of contention in almost every organisation. Transfer pricing is not merely a rational challenge – it often raises the emotions of internal service users and providers who argue regarding scope, quality, price and value.
We have found that effective transfer pricing relies on some fairly simple best practices and critical success factors.
Many organisations recover costs as a regular ‘below-the-line’ deduction from operating division income statements. In our experience, charge out is almost always preferable. This results in internal value judgements and negotiation regarding delivery happening closer to time of use.
We have typically seen that the realisation that internal pricing plays this role and the consequences of poor implementation are not well understood.
Results of poor transfer pricing implementation
Sub-optimal economic use decisions
Where costs / prices are higher than they should be, buyers pass this on as an inflated cost to their customers, experience margin squeeze, or utilise less of the service than they might have.
Strategically this can lead to incorrect decisions regarding the provision of services to the market and loss of market share.
Where costs / prices are lower than they should be, this can lead to overuse of a product or service and poor cost recovery from external customers.
Strategically this can result in the over promotion and sales of products and services that are achieving lower margins than thought, or that might even be making losses.
Sub-optimal investment and resourcing decisions
Incorrect pricing can lead to over- or under-investment in capacity and product or service quality. Further, the resourcing decisions will be incorrect should the price signal to the supplier be incorrect.
Political and emotional argument
Where buyers are unable to obtain assurance that an internal price is correct, there is typically resentment regarding the cost of the internal product and service and the sheltered position employees of the internal service provider occupy – in the buyer’s eyes free from commercial pressures.
Buyers and suppliers typically also argue regarding the quality of the service or product relative to the price paid.
Suppliers may react to criticism claiming their product or service is strategic in nature and refute its availability in the external markets.
Poor product / service quality
Poor price signals will result in lack of comparable product and service quality benchmarks. This can result in ‘gold-plating’ or poor-quality product and service provision.
Read more at https://globaladvisors.biz/2021/01/06/strategy-tools-effective-transfer-pricing/
Fast Facts
Fast Fact: Some of your business segments are destroying value – which?
By Stuart Graham
Key insights
We often see uncertainty in our clients about whether to focus on RONA or growth. While both are obviously important, which will create the greatest value for their companies and shareholders?
We introduced the market-cap curve to help answer this question by plotting the well-known valuation equation for combinations of RONA and growth at a constant valuation.
RONA / growth combinations along the curve preserve the company valuation. Combinations above the curve increase the valuation and combinations below the curve decrease the valuation.
It is easy to see from the graph that companies with high RONA and low growth will benefit more from growth improvements while companies with low RONA and high growth will benefit more from RONA improvements.
The market capitalisation curve provides a useful boundary for capital allocation when business segment performance are plotted against the curve.
ANY performance improvement of ANY business unit raises the aggregate performance and therefore moves the curve outwards – i.e. increases company value.
Selected News
Quote: Jeff Maggioncalda, Coursera
“Is it perfect? No. Is it as good as my executive team? No. Is it really, really valuable, so valuable that I talk to ChatGPT every single day? Yes.”
– Jeff Maggioncalda, CEO, Coursera
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We help clients to measurably improve strategic decision-making and the results they achieve through defining clearly prioritised choices, reducing uncertainty, winning hearts and minds and partnering to deliver.
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Consultants join our firm based on a fit with our values, culture and vision. They believe in and are excited by our differentiated approach. They realise that working on our clients’ most important projects is a privilege. While the problems we solve are strategic to clients, consultants recognise that solutions primarily require hard work – rigorous and thorough analysis, partnering with client team members to overcome political and emotional obstacles, and a large investment in knowledge development and self-growth.
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